Labour market Welcome return to pay growth but far stronger rises needed to beat inflation next year 18 November 2015 Strongest growth among lowest paid following 3 per cent increase in minimum wage Real earnings growth has finally returned, but far stronger pay rises will be needed to beat inflation and sustain the pay recovery next year, the Resolution Foundation said today (Wednesday) in response to the ONS Annual Survey of Hours and Earnings. The 1.5 per cent real earnings growth recorded this year means pay has recovered 13 per cent of the ground lost during the recent pay squeeze. But typical earnings remain 8.9 per cent below their 2009 peak and, on current trends, it will take another six years for typical earnings to return to that level – meaning over a decade of lost pay growth. Pay growth has been strongest among the lowest ten per cent of earners (3.4 per cent), and weakest (0.5 per cent) among the highest earners. Pay has also recovered more strongly in lower paying roles, such as elementary occupations and among sales & customer services. The Foundation adds that Northern Ireland and the West Midlands enjoyed strong rebounds in pay, but real hourly pay is still falling in London, East Midlands and Wales. Matthew Whittaker, Chief Economist at the Resolution Foundation, said: “The long overdue return of real earnings growth is very welcome. “Also welcome is the fact that the recovery has been strongest among lower earners. In part that is likely to be due to ambitious minimum wage increases – which will be reinforced next year by the new National Living Wage. “But the return of rising pay is just the first step on the long journey back to pre-crash wage levels. If last year’s pay recovery is sustained it will take another six years to recover the ground lost since the crash. And it will take even longer for workers in their 20s and 30s. “The recent recovery is also being driven by historically low inflation. We’ll need far stronger nominal pay growth so that when inflation starts to rise family will still feel the benefits of the pay recovery.” Ends Notes to Editors The Resolution Foundation analysis is based on full-time hourly earnings, and is adjusted for RPIJ.
